MAY 8, 2000

Movement at BAR

THERE was much talk in Barcelona about the future of British American Racing. Honda says that it has no plans to buy the team although an option is believed to exist for that to happen at some point in the future but, despite the Honda denials, there is little doubt that Honda ultimately wants to run its own F1 operation. The company has made a point of explaining that its renewed involvement in the sport is not purely as an engine manufacturer but also so that Honda engineers can learn about chassis construction, advanced electro-hydraulic systems and so on. Honda's ultimate aim, however, is to run its own operation. This is a target which was established in the early 1960s when the company founder entered F1 for the first time. That was not a success and although Honda returned as a highly-successful engine manufacturer in the 1980s the long-term goal has always been to have an all Honda team. The whole operation was being set up last year until there was a change of management and the Honda Racing Developments team was broken up. The decision was taken for Honda to enter F1 as engine supplier to British American Racing and there is no doubt that the decision was not based on anything other than money. Last year BAR's performance was embarrassingly poor and Honda had much better choices available. BAT is believed to have won the deal by agreeing to fund the Honda engine development program in exchange for the engines and for an option to buy the team. This means that BAT is in a position to recover much of the money spent on the program. Honda was able to build up to a competitive level in F1 without having to fund the program at a time when other investment was more important. Ultimately Honda's involvement in F1 is not to help a racing team but to sell more cars and to do that it needs to have a team of its own. Using BAR as a Trojan Horse was a good compromise as the team could be blamed if things did not go well.

There are signs that the aims of the parties involved may be changing. The Honda engine is clearly already very competitive but the BAR chassis is not very good. At the same time we hear stories that BAT is unhappy with the entire program and does not want to spend any more money in F1. There are also worries that unless something happens quickly the team may lose its chief asset, Jacques Villeneuve.

There are well-founded rumors in the F1 paddock that BAR is short of money. These seem to be confirmed by the fact that the team is taking legal action to reclaim half a million dollars from Mika Salo. We hear that the company's head of marketing, who was one of the major supporters of the F1 program Jimmy Rembiszewski has been sidelined and there are also stories that the firm's head of sponsorships Tom Moser is also in political trouble within BAT. We have even heard stories suggesting that BAR shareholders have agreed to hand over more equity to BAT in exchange for money to keep the team afloat. This has not been confirmed but if it is the case those shares must come either from Reynard or from a firm called Mount Eagle Inc. Reynard owns 15% of the team but has strong support from Honda. Mount Eagle owns the remaining 35%. The big question is who owns Mount Eagle. There is no doubt that at least half of that company is owned by CART team boss Jerry Forsythe. The other half is believed to be owned by Craig Pollock and Jacques Villeneuve.

The Reynard company is cutting back at the moment. It recently laid off around 50 staff because of the reduction in demand for CART chassis but it is unlikely that Adrian Reynard will give away any of his shares. It is more difficult to understand what is going on with Mount Eagle as Forsythe has broken his links with Honda in CART and is now running Ford engines in the series. At the same time there are persistent rumors that Villeneuve is about to sign for another team and if that happens it is hard to see how he can remain a shareholder in BAR.

Our spies in Japan tell us that Honda is not happy at what is going on in F1 and would like more control. We also believe that BMW's rapid success is worrying Honda bosses.

It is interesting to note, therefore, that Reynard's Rick Gorne, who recently moved to BAR is now tipped to on the way Lola where he is expected to head the CART sales team. Gorne had been expecting a bigger role within BAR.

Clearly there are some delicate negotiations taking place at the moment...